Inside the battle to digitize payments during the coronavirus outbreak

Fast-moving payments innovation was already threatening comfortable connections between consumers and businesses before the pandemic turned the trend into an outright crisis.

For firms trying to make the transition easier, it was time to figure out how to turn long-simmering concepts into fast action.

Four payment technology executives took time out from their response to discuss the virus’ impact, and what the other side looks like, during a group interview on consumer and small-business risks and solutions.

This story is the first of a two-part series on how payment technology executives are handling the coronavirus pandemic.

Most immediately, products that link payment trails to accounts, such as personal financial management tools, have become a lifeline, according to Gross. PFM has existed for years, but it’s mostly been a way to answer “Can I afford this?” questions while shopping. Now it’s a way for dislocated people to stay afloat, said Gross.

“You see it here in Toronto in ads. Banks are promoting mobile and online banking much more than mortgages and wealth management,” Gross said, suggesting a focus on day-to-day payment management that’s based less on credit for long-term aspirational purchases. It’s a phenomenon that installment payment firm Klarna has also noticed, as people use point of sale credit for essential purchases than leisure or luxury goods.

“Responding to these trends is about the digital tools that used to be ‘nice to have’ like digital receipt management and personal expense management that are now necessities for people that are working from home,” Gross said.

At Autobooks, transactions are being organized with an eye on “financial wellness,” or how bill payments, larger transactions and overall financial relationships for small-business owners whose personal financial health often mix with business operations and expenses.

Small businesses are facing myriad problems due to the pandemic, ranging from the personal financial challenges of owners to business liquidity during a time in which payments volume may be down or nonexistent. For many small businesses, personal financial health is directly linked to their business.

“The entire payment industry should take this crisis to reevaluate what people and business operators need to maintain a healthy cash flow,” Sutton said.

The crisis has brought the challenges of underbanked and cash-only businesses into clear relief, according to the panelists. The stimulus checks, which the government started distributing on or around April 15, were fraught with glitches, such as checks going to the wrong accounts or challenges for underbanked consumers who have difficulty accessing the funds.

“There are a lot of people who are living paycheck to paycheck,” said Patel.

PayRange recently deployed its technology at a network of apartment complexes to support mobile payments for laundry machines. That technology could be combined with other mobile wallet features to enable budgeting, Patel said.

“There may be an opportunity here for a product mix that allows people to avoid using only cash or using check-cashing establishments, such as digital prepaid wallets," Patel said. "This would allow people to also budget their spending in an easier manner than putting cash in different piles.”

The challenge to quickly disburse funds will also push innovation that makes digital payments more readily available. Fintechs such as Stripe, PayPal and Square have all pushed small-business credit programs as part of the government lending programs, which opens access to more small businesses to upgrade to digital payments and subsequently bring more consumers into the digital ecosystem.

There’s a lack of a system that allows all consumers to funnel money to a specific need, such as paying rent or other bills, according to Baldwin. “There is really no mechanism in place for this,” he said. “In an emergency environment, you want the ability to push funding out over a national network.”

The recovery measures have included renewed discussion of a public digital wallet, or a central bank digital currency. Often referred to as “digital dollars” or a “public Venmo,” the idea is a modern century version of post office banking that existed in the past, creating a digital payment system for a wider range of people.

As governments globally consider central-bank-supported digital currencies, the concept will likely pick up steam in the U.S., more as a long-range option to enable universal access to government funding.

“A ‘public Venmo’ would be a way to do that,” Baldwin said. “It’s a wallet-based concept in which you could recharge debit or prepaid accounts.”

The coronavirus pandemic has changed the way many industries conduct business — and that's especially true of the legal cannabis industry, which was already struggling in the U.S. to find the best way to handle noncash payments.